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 Richmans' Trade and Taxes Blog

Commerce Dept. sets miniscule tariff on Chinese glossy paper
Howard Richman, 3/4/2010

Yesterday, Commerce Secretary Gary Locke set a miniscule preliminary tariff, ranging from 3.92% to 12.83% on Chinese glossy magazine-quality paper to offset Chinese government subsidies to paper exporters. This miniscule tariff ignores the fact that Chinese currency manipulations alone provide a 20% to 40% subsidy on all Chinese exports as well as a 20% to 40% import duty on all American exports to China.

In February, a bipartisan group of 15 Senators wrote a letter to Secretary Locke asking him to "consider allegations that China's manipulation of its currency is a countervailable subsidy" when making this determination. The letter stated:

For example, the value of China's paper and paperboard exports to the United States increased by 21 percent between 2006 and 2008, jumping from $1.9 billion to $2.3 billion. The dramatic increase in exports is due in large part to substantial Chinese government subsidies. Those government subsidies include China's continued devaluation of its currency vis-à-vis the U.S. dollar, a government policy designed to promote and fuel continued growth in export-oriented industries. As senators from key paper product-producing states, we are very concerned that domestic paper manufacturers and paper industry workers are substantially harmed by subsidized Chinese imports.

The Senators correctly argued that Chinese mercantilism is deindustrializing the American economy. The letter continued:

China's mercantilist policies are undermining the health of many U.S. industries - industries that inject billions of dollars into the U.S. economy and employ hundreds of thousands of American workers. In the face of China's actions to subsidize its exports at the expense of U.S. manufacturers and workers, the Department needs to act.

The letter also recited a history of Secretary Locke rejecting earlier requests from some of these Senators:

In a November 19 letter to the Commerce Department, Senators Schumer and Graham urged the Department to give due consideration to allegations that China's currency manipulation is a countervailable subsidy. In your December 22 response, you assured the Senators that subsidy allegations involving China's currency practices would be assessed "no differently than any other subsidy allegation." The lack of agency action on this issue to date suggests otherwise.

These miniscule tariffs follow closely upon President Obama's failure to do anything, other than talk, when China set new rules in December requiring American companies to move their R&D and patents to China as a condition for doing business with the Chinese government. Pfizer may have been complying with these rules when it recently decided to move its R&D from Connecticut to China.

One million American manufacturing jobs were lost in 2009 under President Obama's watch. How many  American jobs will the Obama administration give to China in 2010?